By Quinton de Villiers
The African Continental Free Trade Area (AfCFTA) is a major development that promises to grow intra-African trade from between 10% to 16% to about 52% by 2022.
To date, African states have mainly been trading with countries in other parts of the world and their exports predominantly comprise unfinished minerals and ore, raw agricultural products and oil.
This is despite there being a huge African market for locally-manufactured finished goods. It comprises as many as 1,2-billion people, while 55 African Union (AU) member states boast a combined gross-domestic product (GDP) of US$2,5-billion.
Encouragingly, a total of 44 of the 55 AU member states have already signed the AfCFTA agreement and it is now being ratified.
It is essentially a single set of rules for trade and investment among all African countries, while also providing legal certainty for traders and investors through the harmonisation of trade regimes.
The development has received much acclaim from experts who expect it to play a large role in facilitating the entry of African-owned companies into new markets on the continent.
Moreover, they anticipate that the AfCTA will stimulate much-needed innovation, as well as research and development into locally-manufactured products.
On average, manufacturing on the continent currently only represents about 10% of total GDP in Africa.
This is far below the world average, with low levels of industrialisation having also stifled the development of small-medium and micro enterprises (SMMEs) that are needed to create well-paid jobs for Africans.
Bear in mind that almost a billion of the anticipated 2,5-billion people who will populate the continent by 2050 will be under the age of 25. As such, the urgency for a robust plan to grow economies and create many employment opportunities cannot be overstated.
SMMEs are also expected to benefit from the anticipated easing of the processes involved in importing raw materials from other African countries.
In addition, they will be able to establish assembly firms in other African countries to access more cost-effective means of producing and, in so doing, increase their bottom lines.
Moreover, it provides an environment for the establishment of strong partnerships between multinationals and African companies.
By tapping into the expertise of global companies in developing local resources, African firms will also be able improve their efficiencies and sales.
Of course, there is also the expectation that the AfCFTA will attract foreign capital that is needed to expand local industries and bolster domestic businesses.
These capital flows should also lead to an upward productivity cycle that stimulates entire African economies. This is in addition to stimulating banking systems that, in turn, will result in further investment into local industries and increased consumer lending.
Bridgewater Logistics agrees that this agreement also provides an ideal opportunity to ensure that factors, such as axel load restrictions and customs fees, which vary from one country to the next, are harmonised.
It is expected that deepening regional integration arrangements and increasing intra-African trade will also drive the acceleration of the development of trans-continental road and railway corridors.
These are critical considering that limitations in infrastructure have played a tremendous role in stifling intra-African trade, while driving up transport and logistics costs.
We learn that over 16 000 km of roads and 4 077 km of rail have been added to the African transport network since the launch of the Presidential Infrastructure Development Agency.
This is an initiative of the New Partnership for Africa’s Development, which also played a prominent role in the establishment of the AfCFTA.
Certainly, its ongoing focus on implementing one-stop border posts (OSBPS) to further streamline the movement of goods across borders is laudable.
There are currently about 80 OSBPs in various stages of implementation and a small number of them are already operational.
South Africa stands to be one of the biggest beneficiaries of the AfCTA.
Bear in mind that businesses in Gauteng, Bridgewater Logistics’ home base, as well as the financial and manufacturing hub of sub-Saharan Africa, already have 200 active investment projects in different parts of continent. These are apparently contributing more than US$30-billion towards intra-Africa trade – a solid foundation to build upon!
Quinton de Villiers is the founder and managing director of Bridgewater Logistics with a long and impressive track-record in African logistics and security. Follow Quinton at #InTheFastLane for more insights and expert commentary on African transport and logistics.